The annual Namibian inflation rate accelerated to 4.1% in June, following the 3.8% y/y uptick in prices in May. The prices in the overall NCPI basket increased by 0.5% m/m. On a year-on-year basis, overall prices in three of the twelve basket categories rose at a quicker rate in June than in May, while five categories experienced slower rates of inflation and four categories posted steady inflation. Prices for goods increased 5.5% y/y while prices for services accelerated to 2.1% y/y in June, compared to the 1.3% y/y increase recorded in May.
The food and transport categories were the largest contributors to annual inflation, making up 1.3 percentage points each of the annual inflation rate and together were the main drivers of inflation in June. Transport prices rose 2.5% m/m and 9.6% y/y. The Road User Levy increased by seven cents per litre in June, contributing to higher fuel prices, which have already been on the rise from the low base a year ago. The Rand also weakened against the US Dollar during June, which further elevated fuel prices.
Food prices rose 0.3% m/m and 7.3% y/y, with prices in all thirteen sub-categories increasing on an annual basis. Namibia is relatively dependant on South Africa for food imports, which would have experienced a spillover effect from the increased transport costs, as well as near all-time high fuel costs in South Africa. The largest increases were witnessed in the oils and fats sub-category, which recorded a 16.7% y/y increase, followed by meat, which posted a 16.0% y/y increase in prices and vegetables, which rose 6.8% y/y.
Alcoholic beverages and tobacco prices contributed 0.3 points to the annual inflation rate, increasing by 0.4% m/m and 2.5% y/y in June. The miscellaneous category also contributed 0.3 points to the annual inflation rate, although decreasing by 0.2% m/m, the category rose posted a price increase of 6.4% y/y.
The 4.1% y/y increase in annual inflation is at the upper-end of IJG’s inflation forecast for the year, as we expect inflation to average 3.8% y/y in both 2021 and 2022. Rising inflation rates have also been witnessed recently in South Africa and, as such, the South African Reserve Bank imposing rate hikes this year is not an impossibility, however, monetary policy is expected to remain accommodative. The Bank of Namibia is expected to follow suit to whichever strategy the SARB pursues. Overall, we expect the annual inflation rate to remain near the mid-point of the SARB’s inflation range for the rest of the year.
